Prospects for the energy infrastructure

The system of generating and distributing electricity is undergoing a slow but radical change. In political science there is a concept called the 'elitist perspective', which describes how individuals and groups assume control over social institutions. Elitist clusters exert power through the manipulation of individuals and governments to achieve their aims and maximize their profits. This is graphically illustrated by the $20 million given by US energy companies between 1999 and 2002 to politicians. Their reward was that 36 representatives from the energy industry were consulted by the Bush administration over future energy policy but no consumer or environmental groups were represented.1 Worldwide energy companies share with pharmaceutical companies the pole position of influence over governments and continents. They will take concerted action when faced with a threat, as, for instance, by the phenomenon of global warming. Everything possible was done to undermine the credibility of the thousands of scientists who contributed to the three United Nations IPCC Scientific Reports on climate change.

Now, in the electricity supply and distribution sector their monopoly is being threatened by three major changes, which emerged during the end of the twentieth century. They have been defined by Carl J. Weinberg as follows:

• Governance - there has been a growing trend to admit competition and market-based approaches to the supply of energy. A consequence of this has been an erosion of central control in favour of diversified market-based enterprises. This has introduced consumers to the concept of choice in the buying of energy.

• The environment - there is growing support for the principle of sustainable development and an awareness of the environmental consequences of the unconstrained use of fossil fuels. The latter twentieth century saw an emphasis on the limitations of the carrying capacity of the Earth and the fact that, for the first time in history, a single species has changed the geophysical balance of the planet. The electricity supply industry will increasingly come under pressure as the major emitter of CO2, the most abundant of human-induced greenhouse gases. Nature, it seems, has offered us a Faustian deal in the form of almost unlimited fossil-based energy for the next 100 years or more whilst ensuring that, if we take the deal, we will devastate the planet.

• Technology - there has been rapid progress in the development of renewable technologies and the emergence of smaller, modular, flexible technologies tailored to the needs of individual consumers and managed by information technology which threatens the hegemony of the big power utilities.

Again, according to Weinberg, 'the conceptual model of a utility as large central power plants connected to [its] customers by wires may well not be the model for the future. This is particularly true for developing countries'.2

It is inherently difficult for big organizations with their bureaucratic hierarchies, their investment in plant and a large workforce tied in to a particular technology to adapt to radical change demanded by so-called 'disruptive technologies' like renewables. Furthermore, what is the incentive if they are still making substantial profits? Studies of technical innovation have revealed that radical innovations have never been introduced by market leaders.3 The state of California offers an example of how the market can rebel against the power of the utilities in response to increased gas prices, spiralling electricity costs - up to 40-50 cents per kWh - and insecurity of supply. Renewables suppliers offered a price of 8.5 cents per kWh fixed for three years. In other states wind energy electricity producers have offered 10-15 year contracts at 3-4 cents per kWh. Such low prices coupled with protection from the volatility of the utilities market are proving a most effective stimulus in attracting people to the renewables option.

In parallel with the awakening of this new concept of energy supply in the USA there has been a marked shift away from large, centralized generating plants to smaller, more localized units. In the 1970s the average output of power stations reached 150 MW, resulting from new large-scale nuclear and coal technology. With the decline of nuclear and the advent of independent power producers the average fell to 29 MW in the first half of the 1990s. So, already the energy infrastructure is moving in the direction of distributed and differentiated supply, which should flag a warning to governments that are planning large nuclear power plants for the future. They will be pushing against the tide.

Increasingly, power plants are being manufactured in assembly lines rather than constructed on site. They are available for small- and medium-size businesses and domestic users. The ultimate shift will come when fuel cells become economic and hydrogen readily available. The market is being stimulated, not just by green imperatives, but also by concerns about reliability and quality. The steady movement away from a 'resources' economy to a 'knowledge' economy is at the heart of this demand for quality and reliability. This embraces both the information-dependent enterprises like the financial markets and production-centred industries which rely on microprocessors. The Americans call this the 7/9s problem, i.e. 99% plus five nines. The grid can only provide 4/9s reliability, which translated means 99.99% reliability. This may seem adequate, but can result in significant losses due to down time. For example, for credit card operators it can amount to $2,580,000 per hour and for stockbrokers $6,480,000 per hour. In these circumstances minutes count yet the total adds up to about eight hours per year. What these operations require is 7/9s or 99.99999% reliability. When electricity storage facilities like advanced batteries and flywheels match small-scale production technologies, we can expect the distributed alternative to invade the electricity production market.

This, of course, will be emphatically opposed by the large utilities who will see their revenue streams threatened. One of their weapons is in setting interconnection requirements which fall under two headings: technical standards and administration. The technical standards relate to ensuring compatibility and quality before a supplier can be linked to the grid. At present the tendency is for the burden of proof that a proposed connection to the grid will not harm the system rests with the supplier not the utility. It is raising the issue that there must be national standards if distributed generation is to have an impact on the future. The same goes for administrative issues concerning how a system is to be inspected and certified, and, above all, the rate at which an independent generator is paid.

In the USA, 32 states have instituted 'net metering', which involves a small independent supplier having a meter capable of going into reverse so that the utility buys back power at the same price it sells to consumers. This is a facility urgently needed in the UK to stimulate the renewables market.

The ultimate configuration of energy supply may be the formation of numerous minigrids, enabling a much more precise matching of supply with demand within a local area. There may be various interconnections between minigrids and with the National Grid. Drawing from the National Grid would be regulated by specified conditions such as using the grid only for baseload requirements. Information technology is now capable of managing the complexities of a system with a large number of distributed resources without centralized control. It can deal with the interplay of supply and demand providing hour-by-hour least-cost outcomes to the benefit of consumers.

In the UK this fundamental reconfiguring of the energy supply system has been endorsed by the Royal Commission on Environmental Pollution which recommends:

a shift from very large all electricity plant towards more numerous combined heat and power plants. The electricity system will have to undergo major changes to cope with this development and with the expansion of smaller scale, intermittent renewable energy sources. The transition towards a low-emission energy system would be greatly helped by the development of new means of storing energy on a large scale.4

The Washington Worldwatch Institute has also endorsed this scenario, stating that 'an electricity grid with many small generators is inherently more stable than a grid serviced by only a few large plants'. That was before 11 September 2001 and the terrorist demolition of the World Trade Center. Now the security of such plants has become a major issue. A dispersed system with many thousands of suppliers is immune to catastrophic failure.

It is unfortunate that many governments still consider renewables to be a sideshow in the scenarios for the energy future. Fossil fuels and nuclear power are still perceived as the dominant players for the next half century, which means a commitment to a centralized grid system operated by a small number of large utilities. Numerous factors are now making small-scale renewable generation attractive and this trend will escalate as the technologies improve and pressures to reduce CO2 emissions increase as evidence of climate changes mounts. It would be the height of folly to commit to a system for decades to come which is highly vulnerable and which is already being supplanted by a wide range of renewable technologies which, for countries like the UK, could meet all energy needs, provided there is an energetic campaign to reduce demand. Because ultimately 'an electron saved is the cleanest option'.5

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